Reviewed by Oct 05, 2020| Updated on
A firm that has listed itself for sale or is considered a potential takeover target by many bidders is referred to as in play. Initially, there may be a rumour that a company is participating in a potential merger or acquisition or a management buyout.
At this point, the company's shares will be referred to as deal stock; the share price will become very volatile as speculation casts a spell. Upon confirmation on a bid is received, the company is put in play and attracts many more bidders.
The share price of a potential takeover target increases based on the expectation that the stock will trade at premium prices during the final purchase of the outstanding shares.
Consider the example of Company A going private due to a hostile takeover attempt. This event put the company in play resulting in a bidding war. Consequently, there was a rise in the offer price, and Company A stole a great deal.